Kent Maker Demonstrates Improving Profits

Published on March 4th, 2014 00:00
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With Lorillard demonstrating continuous expansion on its top rated lines while offering a large profit, it could be complicated to picture the stock being a hazardous investment. At the moment, all continues to be fine. Even so, substantial long lasting headwinds can be found. Lorillard's main rival, Altria Group's Philip Morris USA and Reynolds American's RJR Tobacco, are possible to face identical patterns. This is fairly foreseeable according to noticeably identical trends for these three cigarette manufacturers within the past five years. Even though let's take a look at the present situation for Lorillard and its competitors. At the beginning let's start with a look at performances for Lorillard, Altria, and Reynolds American within the past five years.

Lorillard, best known for its Newport and Kent cigarettes, is experiencing a better top line development than its competitors. The constantly improving profit can be traced to larger volumes and price rises. In Lorillard's 3Q, its retail market share boosted to about 14.9% from 14.4% in the same period a year ago. Its premium market share raised to 17.3% from 16.7% registered a year-ago. As to the popular menthol market, the share also boosted to 40.4% from 39.6%. Additionally, Lorillard has extended its eCig category authority, currently with a massive 49% share. It should also be underlined that Lorillard bought the British eCig company, SKYCIG.

That mentioned, Lorillard noted in its latest 10-Q filing that its power to remain competitive in several markets is controlled because of retail merchandising agreements for Altria's Philip Morris USA and Reynolds American's RJR Tobacco. This restraints retail shelf space, which in turn restraints sales prospective. However, Lorillard has continuously determined a way to overcome its rivals within the past several years. This could make you think that Lorillard has significantly outperformed its rivals in overall return price; however that is not the case. You would be hard pushed to discover an industry that moves around as in sync as this one.

Look at the entire come back price performances for these three companies through the past five years: At this time, Lorillard profits 4.2%. Amazing, but not as huge as Altria at 5.2% or Reynolds American at 5%. None of these cigarette makers demonstrate favorable balance sheets; however they all produce sufficient cash flow that the rewards seem to be safe.

In addition, all these makers are trading at reasonable valuations. Lorillard, Altria, and Reynolds American are trading at approximately 16, 14, and 18 times profits, correspondingly. That' is the very good news.

By Joanna Johnson, Staff Writer.
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